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Federal Program Integrity

Regulations: Change is Now

Vermont Association of Student Financial Aid Administrators Conference

Killington, VermontJune 15, 2011

Harrison M. Wadsworth IIIPrincipal, Washington Partners, LLChwadsworth@wpllc.net202-289-3900www.wpllc.net

Session descriptions

•  • New Program Integrity Regulations Part 1:  the U.S. Department of Education has made a

host of regulatory changes that take effect this year, many on July 1st.  This session will take a look at the changes to the definition of Satisfactory Academic Progress, calculations of withdrawal dates for refunds and return of Title IV funds, changes in the disbursement schedule of Title IV funds and state authorization issues.

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• New Program Integrity Regulations Part 2 Plus a Few Other Regulatory Issues:  There are so many new regulations coming out that they require two sessions.  This session will discuss the many changes in the definition of "gainful employment in a recognized occupation" and what can be expected next, definition of a credit hour, adding a program or location and incentive compensation.  Also touched on will be issues affecting private loans, such as preferred lender lists, and the Consumer Financial Protection Bureau -- and other issues raised by the conference participants.

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What Is Washington Partners, LLC?

• Government and public relations consulting firm specializing in education policy and related issues

• Provides association management, including for COHEAO, and consulting to colleges and universities in the United States and internationally

• Expertise and experience in all aspects of education, P-18

Title IV Aid AvailableFY 2010 FY 2011*(AY 10-11) (AY 11-12)

Pell Grant $ 32,295,200,000 $ 34,834,300,000 (Max Award) $5,550 $5,710

FSEOG $ 958,800,000 $ 958,800,000

FWS $ 1,170,800,000 $ 1,170,800,000

Perkins $ 1,041,500,000 $ 2,609,200,000

LEAP $ 161,555,000 ―

ACG/SMART $ 932,000,000 ―

TEACH $ 79,800,000 $ 93,200,000

Loans $ 108,762,900,000 $ 116,393,200,000

TOTAL $145,402,555,000 $156,059,500,000

Program

What is the CDR Calculation?

• Currently, a school’s cohort default rate is the percentage of the number of the school’s FFEL and Direct Loan borrowers who enter repayment in one Federal Fiscal Year (October 1 through September 30) who default in that federal fiscal year or by the end of the next federal fiscal year.

• Increases continued in 2009 draft rates: 8.9%, 327,669 borrowers, up from 7.0%/238,852

HEOA 2008 Changes Increases the CDR monitoring period

from two to three years. Beginning with the 2009 cohort, the

calculation will be: Borrowers who default in that federal

fiscal year or by the end of the next two federal fiscal years.

Establishes a three-year transition period for sanctions.

2-Year Versus 3-Year Calculation

The Numerator is the number of borrowers from the denominator who default within a cohort period

The Denominator is the number of borrowers who enter repayment within a cohort period

3555000 .071 or 7.1%

6055000 .121 or 12.1%

5,000

FY-09 FY-10125 230

5,000

FY-09 FY-11FY-10

125 230 250

Voluntary Flexible Agreements

• New request for proposals from guaranty agencies issued May 31, 2011 – joint proposals preferred

• Secretary seems intent on setting up more VFA’s, focusing on delinquency prevention

• Longstanding ED concerns over conflicts of interest at GA’s reflected in separation of collections from default prevention, education, loan servicing

• Seen as more efficient, part of consolidation of GAs post-SAFRA and ECASLA

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New VFA Structure

• GA Responsibility Area I--Lender Claims Review, Lender Claims Payment, and Collections

• GA Responsibility Area II (Delinquency and Default Prevention and Management)

• GA Responsibility Area III (Community Outreach, Financial Literacy and Debt Management, School Training and Assistance, and School Oversight)

• GA Responsibility Area IV (Lender and Lender Servicer Oversight)

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VFAs• Much concern by ED over FISMA – information security – as

GA’s wind down• Collections deemed to be more efficient if fewer GA’s involved.• Enhanced oversight by ED of GA’s, more reporting

requirements• Key duties: default and delinquency prevention, financial literacy

programs,

• “A guaranty agency that assumes GA Responsibility Area I (Lender Claims Review, Lender Claims Payment, and Collections) may not also assume GA Responsibility Area II (Delinquency and Default Prevention and Management) or GA

Responsibility Area IV (Lender and Lender Servicer Oversight).”

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Regulations Galore July 1• Negotiated Rulemaking process on “Program

Integrity Issues” took place summer 2009-fall 2010

• Not triggered by statutory change but instead by 2008 election.

• Contentious, little hope of consensus given makeup of negotiating committee

• Biggest points of dispute: GAINFUL EMPLOYMENT definition, Incentive compensation, credit hour, state licensing.

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Program Integrity Regs NPRMs published June 18 - To improve the

integrity of the Title IV student assistance programs.

Comment Period Ended August 2, 2010 Final regulations published on Oct. 29, 2010 Generally effective July 1, 2011 (2011-2012 AY) Verification effective with the 2012-2013 AY

But Wait!• Series of bills being introduced in the House to

repeal program integrity regs– Gainful employment passed in April as part of 2011

CR, dropped in conference– H.R. 2117 by Rep. Virginia Foxx (R-NC) passed

Subcommittee on Higher Education June 14 – repeals credit hour definition, state oversight expansion

– More in the future

• Not likely to pass Senate, Sen. Tom Harkin (D-IA) has own plans

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High School Diploma

• Never specifically defined – know it when you see it• Schools required to verify if reason to believe

diploma/school not valid– Schools must develop procedures (1st yr students)– ED will provide further guidance later

• Questions will be added to FAFSA on high school• ED will maintain list of “approved” schools

• Being on the list does not mean “approved”• Not being on the list does not mean “unapproved” or

“questionable”

Ability to Benefit

• Students considered to have the ATB if:– High school diploma or equivalent– Pass an approved ATB test– Satisfactorily complete 6 semester hours, 6

trimester hours, 6 quarter hours, or 225 clock hours that are applicable toward a degree or certificate offered by the institution.

– Does not have to be same program, but should be “rigorous”

• Defines “independent test administrator”

Satisfactory Academic Progress

• Financial aid warning – students may still get aid for one additional payment period– Only allowed if school measures SAP every

payment period

• Financial aid probation – student failed to have SAP and has appealed successfully and is receiving aid– School allowed to impose conditions such as

reduced course loads

Satisfactory Academic Progress

• Schools must specify pace that student must matriculate to complete in maximum timeframe

• Policy must include:– How pace measured– How transfers affect SAP

• Transfer credits count towards completed and attempted credits in calculations

Satisfactory Academic Progress - Appeals

• Must have written policy• Student must explain why they did not progress and what has

changed to allow them to do so now• Student must meet one of two elements for successful appeal

– The institution has determined that the student should be able to meet satisfactory progress standards after the subsequent payment period, or

– The institution develops an academic plan with the student that, if followed, will ensure that the student is able to meet the institution’s satisfactory academic progress standards by a specific point in time.

Written Arrangements Between Eligible Institutions

• Proprietary schools entering written arrangements with other eligible schools under same ownership must provide at least 50% of the program offered

– Public and private non-profits exempted

•Schools entering written arrangements with other eligible schools NOT under same ownership must provide at least some of the program offered

Written Arrangements Between Ineligible Institutions

• No written arrangements allowed for schools ineligible due to adverse action by ED, accrediting agency or state

• Ineligible school in written arrangement with eligible school under common ownership may provide only up to 25% of program

• Ineligible school in written arrangement with eligible school NOT under common ownership may provide up to 50% of the program

Return of Title IV Aid

• New Reg

-- Modifies and clarifies the definition of when a student is considered to have withdrawn from a program

-- Clarifies the circumstances under which an institution is required to take attendance for the purpose of determining last date of attendance.

Taking Attendance

• Proposal would add following requirements to definition of schools required to take attendance:– The institution itself has a requirement that its

instructors take attendance; or – The institution or an outside entity has a requirement

that can only be met by taking attendance or a comparable process, including but not limited to, requiring that students in a program demonstrate attendance in the classes of that program, or a portion of that program

Taking Attendance – Impact of Proposal

• An institution required to take attendance may use only the last date of attendance as the withdrawal date;

• An institution not required to take attendance may use:– the date the student officially withdraws, or,– for students who do not at least begin the institution's

formal withdrawal process, the midpoint of the payment period or

– some other date based on documented participation in an academically-related activity.

Taking Attendance – Defining Academic Activity

• For attendance purposes, an academic activity is:– Physically attending a class where a teacher is present– Submitting an academic assignment– Taking an exam or computer assisted instruction– Attending a study group that has been assigned by the school– Participating in an online discussion about academic matters– Contacting an instructor to discuss academic subject studied in the

course• It is not

– Living on campus– Using the cafeteria– Logging into an online class with no participation– Academic counseling or advisement

State Authorization• More details – see DCL GEN-11-05, March

17, 2011 – state authorization required to be eligible for Title IV funds

• States must name institution in some way to give it legal right to exist, all required licenses must obtained– Public community colleges seen as part of state

govt so don’t have to be named. Religious schools generally exempt

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Distance Ed• Distance ed programs must be separately

licensed in every state where there are students -- some leeway on enforcement:– “The Department will not initiate any action to

establish repayment liabilities or limit student eligibility for distance education activities undertaken before July 1, 2014, so long as the institution is making good faith efforts to identify and obtain necessary state authorizations before that date.”

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Credit Hours• Regs seek to define credit hour in terms of work completed by a

student…– Carnegie Unit remains the basis

– Consists of one hour of classroom or direct faculty instruction and a minimum of two hours of out of class student work for approximately fifteen weeks for one semester or trimester hour of credit, or

– ten to twelve weeks for one quarter hour of credit, or the equivalent amount of work over a different amount of time

• Alternative would be based on learning outcomes• Responsibility for review of institutional policies would rest with

accrediting agencies• Clock hours may be used if credit hour definition for a program is

deficient

Definition of a Credit Hour• 1 hour of direct faculty instruction +

at least two hours of student work outside classroom over set period of time for 15 weeks = 1 Credit Hour

• Does not have to be exact, stated intent is to be flexible: conforms to “commonly accepted practice”

• Not dependent on seat time but needs metric of some sort, such as completion of work in time

• Accrediting agencies required to focus on whether policies in place and applied

• Enforcement flexibility next year

Misrepresentation by an Institution

• “When the institution itself, one of its representatives, or any ineligible institution, organization, or person with whom the eligible institution has an agreement, makes a substantial misrepresentation regarding the eligible institution, including about the nature of its educational program, its financial charges, or the employability of its graduates.”

Substantial Misrepresentation• Any misrepresentation on which the person to whom

it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment.

• Does not include statements made by students through social media or by vendors not engaged in enrollment or education

• Possible results:– Revoke program participation agreement;

– Limitations on participation in Title IV programs

– Deny participation applications made on behalf of the institution; or

– Fines and penalties

Misrepresentation by an Institution

• Claims that constitute substantial misrepresentation by an institution would include, if not true:– Offers of scholarships to pay all or part of a course

charge; – A charge is the customary charge at the institution for

a course; – The cost of the program and the institution's refund

policy if the student does not complete the program– Loan repayment or forgiveness information or other

financial aid information;

Misrepresentation by an Institution

– Program cost– Refund policy– Students right to reject all or a portion of aid– Whether employment is being offered by institutions

• Help wanted• Business opportunities• Men and women wanted to train for…

– Cannot describe Title IV eligibility in a way that implies ED endorsement of school

Repeating Coursework

•Repeated courses count towards enrollment status regardless of credits earned for term-based program only

– Non-term based programs remain unchanged; credits must be earned in addition to those previously earned.

– Can be repeated only once– Does not include previously passed courses due to

student failing other courses

Disbursements

• Disbursing Federal Student Aid Funds: Institutions are required to ensure that Pell Grant recipients have resources to obtain books and supplies by the seventh day of payment period.

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Private Loans: Overview of Final Rule

• New disclosures and timing rules:– Disclosures on or with an application– Disclosures after loan approval– Consumer’s 30-day acceptance period

• No changes to rate or terms with some exceptions

– Disclosures at consummation– Consumer’s 3-day right to cancel

• Creditor must not disburse funds37 Source: USDE

Overview of Final Rule (cont.)

• Self-certification form before consummation• Lenders require school certification

• Model disclosure forms developed through consumer testing and in consultation with the Department of Education

• Prohibition on co-branding in marketing• Provision of information by creditors to educational

institutions with Preferred Lender Arrangements

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Program Participation Agreement Requirements

• Institutions must develop, publish, administer and enforce a code of conduct with respect to loans made under the title IV, HEA loan programs in accordance with §601.21

• For any year an institution has a PLA, annually compile, maintain and make available to students, a list of private education loans the institution recommends

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Program Participation Agreement Requirements

• Institutions must, upon request of an enrolled or admitted student applicant of a private education loan, provide the applicant with the self-certification form and the information needed to complete it

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Definition of Creditor

• A “creditor” means a person who “regularly extends” consumer credit that:

• Is subject to a finance charge; or• Is payable by written agreement in more

than four installments– And is the person to whom the obligation is

initially payable

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Coverage – Loans

• Covers loans made in whole or in part for “postsecondary educational expenses” at covered educational institutions, including unaccredited.

• Excludes:– Federal Title IV loans (NOT health professions )– Open-end (revolving) credit– Real-estate secured loans– Two types of credit extensions made by

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Coverage – Loans

• Excludes credit extended by educational institutions if:

• The term of the credit extension is 90 days or less; OR

• An interest rate will not be applied to the credit balance and the term is one year or less, even if the credit is payable in more than 4 installments

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Coverage – Loans

• Exclusions applicable to credit extended by educational institutions are only exempt from the new private education loan rules, not from all of Reg. Z

• As a result, disclosures under the Truth in Lending Act may still be required under 12 CFR 226.17 and 226.18, (according to Dept. of Ed)

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• Preferred lender arrangement – an arrangement or agreement, between a lender and covered institution, in which a lender provides education loans to students/families and the covered institution recommends, promotes or endorses the education loan products of the lender

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HEOA Loan Disclosures Key Terms

HEOA Loan Disclosures Key Terms

• Preferred lender arrangement (cont.) –– Includes arrangements between a lender and

an institution-affiliated organization– Does not include arrangements involving:

• Direct Loan Program loans • Loans originated through PLUS auction pilot

program

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HEOA Loan Disclosures Key Terms

• Preferred lender arrangement (cont.)– Does not include private education loans made

by a covered institution to students attending a covered institution if the private education loan is:• Funded by covered institution’s own funds• Funded by donor-directed contributions

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HEOA Loan Disclosures: Key Terms

• Preferred Lender Arrangement (cont.)– Does not include private education loans made

by a covered institution to students attending a covered institution if the private education loan is made under:• Title VII or VIII of Public Service Act• A State-funded financial aid program, if the

terms and conditions of the loan include a loan forgiveness option for public service

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Applicability of GEN-08-06 to Private Education Loans

• GEN-08-06 guidance applies to private education loans

– Covered institution not considered in a preferred lender arrangement if it provides borrowers with neutral, comprehensive list of private education lenders that have made loans within a 3-5 year time period and a statement that borrower can choose any lender

– Covered institution cannot recommend any lender and may include a comparison of the private loan terms and conditions

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Applicability of GEN-08-06 to Private Education Loans

• GEN-08-06 guidance (cont.)– Covered institutions may refer borrowers to a

3rd party entity that maintains neutral, comprehensive list and not be in a preferred lender arrangement if institution ensures that the list is broad in scope, does not endorse any lender and lender does not pay to be placed on the list or pay the 3rd party entity a fee based on loan volume generated.

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Preferred Lender Arrangement (PLA) Disclosures

• Covered institution/institution-affiliated organization participating in a PLA must disclose on its Web site and all “informational materials” that describe private education loans:– Maximum amount of aid available under title IV– Disclosures required by TILA §128(e)(11) for private

loans offered by covered institutions– Disclosures required by TILA §128(e)(1) for private

loans offered by institution-affiliated organizations

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PLA Disclosures (cont.)

• “Informational materials” = publications, mailings, electronic messages or materials:– Distributed to prospective/current students– Describe/discuss available financial aid

opportunities• Disclosures must be provided annually for

each type of private education loan offered pursuant to a PLA for consideration before a student borrows

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Preferred Lender List Requirements

• Institution’s preferred lender list must contain not less than 2 unaffiliated private education lenders and clearly and fully disclose for each lender:– Reasons institution includes lenders on list, particularly with

respect to loan terms/conditions favorable to borrower– That students do not have to borrow from lender on list– Method and criteria used to choose lenders to ensure

lenders selected on basis of best interest of borrowers• Institution must compile preferred lender list without prejudice

and for sole benefit of students attending the institution

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Private Education Loan Disclosures

• Covered institution or affiliate that provides information on private education loans, regardless of participation in a PLA, must:– Provide prospective borrower with TILA disclosures

under §128(e)(1)– Inform borrowers of possible eligibility for title IV

loans & that title IV loan terms/conditions may be more favorable than private education loans

• Private loan disclosures must be presented in manner distinct from title IV loan information

Private Education Loan PLAs

• Covered institutions or affiliates that participate in a PLA with a lender of private education loans:– Cannot agree to the lender’s use of the name,

emblem, mascot, or logo of the institution or affiliate or pictures, words or symbols identified with the institution or affiliate in the marketing of private education loans in a way that implies the loan is offered or made by the institution or affiliate

– Must ensure the lender’s name is displayed in all information and documentation related to the loan

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PLA Annual Report

• Covered institution/affiliate participating in a PLA:– Must submit to ED an annual report that includes

for each private education lender in the arrangement:• Disclosures provided on institution’s preferred

lender list– PLA Annual Report must contain:

• Detailed reasons why entity participates in a PLA with each private education lender including why terms and conditions of each loan provided pursuant to a PLA are beneficial to borrowers

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PLA Annual Report

• School must ensure the report is made available to the public, and current and prospective students

• Note: ED has not issued a format or guidance for compiling annual reports, so it is not currently requiring them

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QUESTIONS??

For Part 1

Federal Program Integrity Regulations: Change is Now

Harrison M. Wadsworth IIIPrincipal, Washington Partners, LLChwadsworth@wpllc.net202-289-3900www.wpllc.net

Moving Forward 2011

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Federal Program Integrity

Regulations: Change is Now

Vermont Association of Student Financial Aid Administrators Conference

Killington, VermontJune 15, 2011

Harrison M. Wadsworth IIIPrincipal, Washington Partners, LLChwadsworth@wpllc.net202-289-3900www.wpllc.net

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New Incentive Compensation Reg Says:

In order to be an eligible institution a school:• will not provide any commission, bonus, or other

incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of title IV, HEA program funds.– 34 CFR § 668.14 (b)(22)(i)

Incentive Compensation• All 2002 reg safe harbors eliminated• Non-Title IV eligible programs don’t count• Allows 3 annual raises as long as not directly

or indirectly based on enrollment/aid– Rebuttable presumption of guilt in effect for those

engaged in enrollment, financial aid or recruitment

• Profit sharing and bonuses ok as long as are of same percentage as other employees

Incentive Comp

• Foreign student recruitment exempt if student not eligible to receive aid

• Includes athletic recruiting– Bonus’ ok if based on success

• Institutions should re-examine all contracts with recruiters and compensation policies for admissions and financial aid and their supervisors to ensure compliance

• Enforcement: you will know it when it happens

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The Two-Part Test…

• Is the payment a commission, bonus or other incentive payment?

• Is the payment based in any part, directly or indirectly on success in securing enrollments or the award of financial aid?

• If yes to both, the payment is prohibited.

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Incentive pay rule components

• BUT, a couple of exceptions have now appeared: See DCL GEN-11-05– Tuition Sharing OK under three conditions:

1.Payment is to unaffiliated third party

2.Third party provides bundled services that may include recruitment

3.Third party has no say in admissions decisions.

Gainful Employment

• HEA: proprietary schools and non-degree programs at all schools must provide “gainful employment in a recognized occupation.”

• In the law for decades, definition got a lot longer: 5 words result in 432 pages of regulations.

• Final regs not as tough as draft – still controversial

Gainful Employment

• Applicable to all participating institutions• Two Final Rules published on 10/29/2010 with

effective date of 7/1/2011.• Final Rules published on June 2, 2011

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GE

• Alarm over growing student loan debt• Concern over creating labor “oversupply”

when the number of expected job openings in certain occupations is significantly lower than the number of degrees being produced

• Protect taxpayers against wasteful spending on educational programs of little or no value that lead to high indebtedness

• Leave former students with debt or default and no access to future aid

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GE Rules Cover…• All programs at for-profit institutions

– Except liberal arts baccalaureate degree programs

• Otherwise eligible Non-degree programs at public and private not-for-profit institutions– Exceptions are teacher certification programs

where the certificate is awarded by the state

Gainful Employment Regs Effective July 1, 2011

• Program eligibility regulations based on debt, income formulas not effective until July 1, 2012

• BUT: reporting requirement effective in a few weeks• Reporting is on all students regardless of aid • Exception for students for whom school does not have a

Social Security Number• First annual report on employment due no later than October 1,

2011; must include information for students enrolled in GE programs in:

• 2006-2007, 2007-2008, 2008-2009, 2009-2010 award years• If some info not available, written explanation must be

provided

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GE Requirements Effective July 1, 2011

Data elements to be reported include:

• Award year• Student info• CIP code• School code• Credential level• Federal, institutional and Private loan amounts• Attendance information

GE Disclosure Requirements Effective July 1, 2011

School must disclose on Web site and on all promotional materials provided to prospective students:• SOC code of occupations programs prepare for

– Links to profiles of those occupations from US Department of Labor

– On-time graduation rate for students completing each GE program

– Cost for student completing in “normal” timeframe• Includes tuition and fees, books and room and board if

applicable

GE Disclosure Requirements

• Disclose to prospective students:– Job placement rate for completers– Median loan debt for completers

• Must report federal, private and institutional debt separately

• School must determine this year, ED will provide in subsequent years

• School must use own format until ED provides one

Adding New Programs

• New programs defined as:

– CIP coded program that is different from any other program offered by the school or

– A program with the same CIP code as another at the school but that leads to a different degree or certificate or

– One that the school’s accrediting agency determines to be an additional program

New Program Approval• ED must be notified of new covered programs at least 90 days

before 1st day of class– Include date of 1st day of classes– Programs beginning after July 1st but before October 1, 2011, must

be reported to ED no later than July 1st.• Notification must include statement as to the school’s belief that the

program should lead to employment in the field for which it is preparing students

• ED may request additional information at later date– School may go ahead and start program unless ED requests info at

least 30 days prior OR– Otherwise informs school that the program must be delayed– Schools on provisional certification must seek approval before

starting new programs

Reporting RequirementsFor each affected program an institution must report:

– number of students that are enrolled at the end of the award year – identifying information for those students

•Students who complete program that award year:• name and CIP code of program• Date student completed program• Amount student received in private loans• Amount student received in payment plans• What the student owed the school when they completed• Whether the student moved to a higher degree within or outside the institution

•Students who begin program that award year:• Name and CIP code of the program

•First set of four year data due October 1, 2011• Includes back to 2006-2007 award year• Future dates announced by ED, but no earlier than September 30 th.

Gainful Employment, cont.• Gainful Employment Information Page

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http://ifap.ed.gov/GainfulEmploymentInfo/index.html

Gainful Employment, cont.• Updated list of Frequently Asked Questions

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http://ifap.ed.gov/GainfulEmploymentInfo/2011GEFAQ.html

Send GE related questions to: GE-Questions@ed.gov

Gainful Employment:Rules Effective July 1, 2012

• Eligible GE Programs must meet at least one of the following three criteria for one of the past three years:

– At least 35% of former students have reduced loan principle by at least $1 during past year

– Estimated monthly payment for typical graduate does not exceed 30% of discretionary income

– Estimated annual loan payment for typical graduate does not exceed 12% of total earnings

– Put another way: If the program fails all three tests for three of four years, it is disqualified

Penalties

• If a program (not the entire institution) fails all three metrics three times in four years, the program loses eligibility for all Title IV federal aid for its students

• First programs could lose eligibility in 2015 (for three years through FY 2014 metrics)

• Eligibility losses capped at 5% of programs for each type of college for FY 2014 only

• Exception for programs with less than 30 borrowers• Programs will be ineligible for at least three years

before they can re-apply

GE Penalties

• Year one fail:– School must disclose to current and prospective

students that school did not meet debt measures and by how much

– Disclosure must include what school is doing to improve stats

– No public warning required– School must establish three-day waiting period

before allowing students to enroll

GE- Penalties• Year two fail

– School must do same disclosures as year one and:– Include if and when it plans to discontinue the program;– Plain language explanation of risks associated with continuing or

enrolling in the program;– Options and consequences if the program becomes ineligible for

aid;– Explanation of resources available to research other education

options;– A clear and conspicuous statement that a student who enters or

stays in the program should expect to have difficulty repaying their student loans;

– Disclosures to enrolled and prospective students until schools meets at least one metric for two of the most recent three years.

GE Debt-to-Income Ratio• Applies to Associate and Certificate programs based on 10-

year repayment plan• Allies to proprietary Bachelors and Masters degree programs

based on 15-year repayment term– Liberal arts programs exempted

• Graduate and professional measurements based on 20-year repayment

• Would use most current income available for students who completed the program in the most recent four years– Six years for those with less than 30 borrowers

• Repayment rate is reasonable if annual loan payment is 30% or less of discretionary income OR 12% or less of annual earnings

Debt-to-Income Ratio: Debt

• Calculated Annual loan payment is lesser of:– average loan debt of students who

completed that program during the most recent 4 – 6 year period or,

– Total tuition and fees charged the student for all programs and current annual interest rate on Federal unsubsidized loans at time of calculation

Debt-to-Income Ratio: DebtLoan debt includes:– Sub and unsub Stafford– Perkins– Graduate PLUS– Consolidation Loans– Private Loans– Institutional payment plans or loans– Any private educational loans or debt obligations arising from institutional

financing plans– Only debt accumulated in the applicable program or at the same/a related

institution will be used in the calculation• Up to highest degree completed at school• May include other institutions debt if under common ownership

• Loan debt does NOT include:– Parent PLUS loans– Loans where the student attended school or the military during earnings

period– Loans where the student died or was submitted to ED for TPD

Debt-to-Income Ratio: Income• Average annual earnings using most current info from

Social Security Administration or another Federal agency

• Earnings counted for students who completed program during most recent four-year period

• Discretionary income: average annual earnings minus 150% of the poverty rate for single person in the continental US– http://aspe.hhs.gov/poverty– 2010 poverty guideline for a one-person family:

$10,830 (August 2010)

Loan Repayment Rate: The Calculation

• FFY = Federal fiscal year 10/1 – 9/30• OOPB = original outstanding principal

balance including capitalized interest on the day they first entered repayment• All FFEL and DL that entered repayment in the

four preceding Federal fiscal years

• LPF = Loans paid in full• Loans can have never been in default• Consolidations not counted

• PML = payments-made loans

OOPB of LPF + OOPB of PMLOOPB of all loans for students

attending the program

Loan Repayment Rate• $1 per year of principal of federal loans required to

be PML looking at past 4 years– No parent PLUS or TEACH loan counted– Portion of consolidation loan attributable to program

counted– Includes transferred debt for same program– Included regardless of completion– Borrowers qualifying for PSLF count as PML– Borrowers making interest only payments count as PML

up to 3% of total of OOPB

Net Price Calculator

• The Higher Education Opportunity Act of 2008 (HEOA), provides that, by October 29, 2011, each postsecondary institution that participates in Title IV federal student aid programs must post a net price calculator on its website that uses institutional data to provide estimated net price information to current and prospective students and their families based on a student’s individual circumstances. The net price calculator is required for all Title IV institutions that enroll full-time, first-time degree- or certificate-seeking undergraduate students.

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Net Price Calculator (cont.)

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Institution’s Price of

Attendance for First-Time, Full-Time

(FTFT) undergraduates

Institution’s Price of

Attendance for First-Time, Full-Time

(FTFT) undergraduates

Total need- and merit-based federal,

state, and institutional

GRANT aid awarded to FTFT

undergraduate students

Total need- and merit-based federal,

state, and institutional

GRANT aid awarded to FTFT

undergraduate students

Number of FTFT students receiving

such aid

Number of FTFT students receiving

such aid

Price of Attendance = average annual cost of tuition and fees, room

and board, books, supplies, and

transportation

Price of Attendance = average annual cost of tuition and fees, room

and board, books, supplies, and

transportation

-=Net PriceNet Price

Net Price Calculator (cont.)

• Institutions may use Department’s calculator or develop its own NPC.– If developing its own calculator, an institution

must use (at a minimum) all inputs and outputs of Department’s Net Price Calculator

• NPC must be published on institution website by October 29, 2011– School must create website for the NPC if it

does not already have one

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Net Price Calculator (cont.) Department’s Net Price Calculator:Part I - Institution application: Data provided by an institution to calculate a

student’s net price, including: • Price of attendance elements (tuition, fees, books and supplies, room and board,

and other educational expenses.)• Median amount of grant and scholarship aid awarded to, and accepted by, first-

time, full-time undergraduate degree or certificate seeking students, grouped by expected family contribution (EFC) ranges.

• Institutional Disclaimers

Part II – Inputs from Student: Nine questions to determine: • Dependency status (age, number of children, marital status), • Approximated EFC (number in family, number in college, income) • Estimated cost (price) of attendance (housing, residency status)• Asks if student intends to apply for aid

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Net Price Calculator (cont.)

Department’s Net Price Calculator Outputs:• Estimated total price of attendance• Estimated tuition and fees• Estimated room and board • Estimated books and supplies • Estimated other expenses (personal expenses, transport, etc.)• Estimated total grant aid • Estimated net price• Percent of the student cohort that received grant aid; and • Caveats and disclaimers.

– e.g. My school participates in only Direct Loans; Price may differ for international students.

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Net Price Calculator (cont.)

Net Price Calculator On-Line Resourceshttp://nces.ed.gov/ipeds/resource/net_price_calculator.asp

• Template• FAQ’s• Contacts• Tools

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Neg Reg 2011

• Because there are never too many regulations…

• ED announced May 5, 2011 intent to have new negotiated rulemaking– Death and disability loan discharge rules– Direct lending regs to stand alone– Other issues – whatever they decide to put on the

agenda based on proposals from the public via Regs.gov and three hearings around the country

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ANY QUESTIONS?Part 2 (or Part 1)

Federal Program Integrity Regulations: Change is Now

Harrison M. Wadsworth IIIPrincipal, Washington Partners, LLChwadsworth@wpllc.net202-289-3900www.wpllc.net

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